CONTRA VIEW: Financial inclusion is the key

PUBLISHED: 00:03 GMT, 16 January 2015 | UPDATED: 00:03 GMT, 16 January 2015, Mail Online India

Original link is here

For the last two decades India has not only accepted but actually revelled in being labelled an “emerging market”. India felt pleased and privileged by this tag, which seemed to signify that it had somehow ‘arrived’.

Strangely enough, the country’s sense of pride came not from being an industrial powerhouse, financial centre, or innovation capital. It was perversely derived from being seen as a ‘market’.

The problem is that markets fluctuate and can be a haven for merely temporary investments. As just a ‘market’, India was consigned to remain the chosen destination for everything the rest of the world produced in excess. Therein lay a deep disconnect — consumption can only go hand in hand with production. Surely India could not have hoped to emerge as a global power on the back of being a mere market, one that ran a trade deficit with over 100 countries!

Aspirations

Clearly, India’s self-image needed a re-boot. This rebooting of India’s 1.3 billion aspirations was conducted by the Prime Minister on the 15th of August last year. He did it with characteristic simplicity, by a simple call for “Make in India”. A call he hoped, would catalyse a seismic shift in India’s image of itself.

The world has changed since the Financial Crisis. Economic growth cannot be taken for granted. According to the IMF, global growth will continue to be under four per cent for some years. Even this nominal growth will not come without innovation to increase productivity, enhance quality and cut costs. And importantly, the race to be at the forefront of global innovation has intensified. India’s economy and enterprises must be prepared to face increasing global competition. “Make in India” must therefore attempt pushing Indian industry through global competition into a tsunami of innovation. It must not be misappropriated for primitive protectionism or misunderstood to imply insular industrialisation.

The “Make in India” initiative is at its core a ‘call to arms’ so that we as a country invest in our most precious resource- our demography. In a few years India will have the world’s largest workforce. It perhaps already is the world’s youngest workforce. Why must our youth be productive and innovative in Silicon Valley alone or help create financial instruments in only London and New York? To rectify this, we must build the eco-systems and conditions that can create the most productive, the most innovative army assembled in human memory; a peaceful army of wealth creators for the society and country.

Skill

“Make in India” is therefore a rallying cry for “Made by India”. Its purpose is to arm close to quarter of a billion youth, between 15-24 years of age, with the tools to be productive. The rallying cry is also immediate. It is to skill around 500 million workers to innovate, create and add value to the global economy. We have in a limited way shown this can indeed be done. We have shown it in the automotive sector, which has rapidly become the seventh largest in the world. We have shown it in refining and petro chemicals where we use the worst quality raw materials and transform them into top-end products intended for the most discerning markets. We have shown it in telecom, where we are constantly innovating to empower millions through technology — a transformation which will soon touch the lives of a billion telephone subscribers in ways not imagined elsewhere.

But in all these areas we have shown it as an exception—an exception that only proves the rule. What has been the rule for India? The rule for India so far has been Jugaad. “Make in India” is not Jugaad. Moving beyond frugal innovation, it means delivering value to the consumer at the bottom of the pyramid, the 800 million or so who live at less than two dollars a day. The bottom of the pyramid also needs value, and it increasingly demands value—not just in manufactured products but in services, in transportation and in financial services. They demand the same value that high net worth consumers of the Atlantic countries demand of their manufacturers and service providers. “Make in India” is a proposition to “Make for this India.” And what is made for this India is relevant to many communities in Africa, Asia and elsewhere too.

Simultaneously, the “Digital India” initiative offers unforeseen opportunities to small producers, farmers, artisans and solution providers. It has the potential to ensure that we find an Indian fingerprint in every mosaic, a little bit of India in everything produced and consumed globally. It offers India the opportunity to leapfrog generations of industrial evolution and become part of global value chains. It offers the chance to make the informal sector—employing more than 90 per cent of the workforce—as productive as the formal sector. There is an unprecedented opportunity to integrate with the global market place, virtually. The “Digital India” initiative can transform “Make in India” to “Make with India.”

Initiative

The “Digital India” initiative is complemented by the Prime Minister’s Jan Dhan Yojana, which has far greater power than any similar initiative to transform the lives of the excluded. Fifteen million bank accounts were opened in one day, and potential remains immense. Jan Dhan Yojana can be a basis for providing access to rural credit, crop insurance, loans to scale MSMEs, and for families and individuals to respond to special events and calamities. Financial inclusion is the building block for unleashing the creative capabilities of this country.

When these three initiatives can be synchronised and skilling the workforce made central to each of them, the prospect for India becomes truly transformational. It becomes a promise that it is now “Time to Make India.”

The writer is vice presdent, Observer Research Foundation. His Twitter handle is @samirsaran

BRICS, In the News, Politics / Globalisation

In Economic Crisis, Conference Points to New Needs in Global Governance and Redistribution of Wealth

March 15, 2009
Brown University, RI, USA

Link of the video of Samir Saran speaking at the event (video II, 4.09 min onwards)

http://www.watsoninstitute.org/news_detail.cfm?id=1090

In the runup to the economic crisis meeting of the Group of 20 nations in April, a major international conference at the Watson Institute last week looked into global governance issues hindering the search for solutions, as well as ways in which a fundamental restructuring of the world system may in fact occur. The event, “Regional Powers, New Developmental States, and Global Governance: BRICSA in the New World Order,” was co-sponsored with the University of Wisconsin Law School. It focused on the role of the newly emergent regional and continental powers of Brazil, Russia, India, China and South Africa in this time of economic crisis, highlighting the risks and opportunities they face.

In addition to global governance reform, themes emerging from the two-day meeting also included a move toward redistribution of wealth – with a new emphasis in such countries as China and India on solving internal inequalities while refocusing on domestic growth. On governance, Nehru University Professor Bhupinder Chimni, a visiting professor at the Institute, said: “The way forward is for countries like India, in alliance with the BRICSA countries, to frame and articulate an alternative discourse on the future of global governance relying on its own experiences – pre-colonial, colonial, and post colonial. It should not simply react to Western proposals.” On the redistribution of wealth, Former Austrian Chancellor and Institute Visiting Professor Alfred Gusenbauer said: “If you want to have a recovery of the world economy, it only can work if there is a redistribution of wealth.”

Short videos below expand capture these two themes. Speakers in the videos include:
• “Conference Report I: Global Governance in an Economic Crisis”: Nehru University Professor Bhupinder Chimni, a visiting professor at the Institute; South African High Court Judge Dennis Martin Davis, a visiting professor at the Institute; and Watson Institute Professors David Kennedy ’75 and Barbara Stallings.
• “Conference Report II: Risks and Solutions in an Economic Crisis”: Universidade de São Paulo Professor Glauco Arbix; Former Austrian Chancellor and Institute Visiting Professor Alfred Gusenbauer; Indiana University Assistant Professor Ho-fung Hung; Observer Research Foundation Vice President Samir Saran; and attorney Leopold Specht, a visiting fellow at the Institute.

A summer institute at Watson on “Law, Social Thought and Global Governance,” organized under the new Brown International Advanced Research Institutes (BIARI) program, will explore these issues further as it convenes scholars from around the world for two weeks in June.

An in-depth report and video of the BRICSA conference will be posted in coming weeks.

The financial crisis across the globe and the ensuing responses by nations and non-state actors has dominated both public consciousness and political debate in the recent past. The discussion on suitable stimulus packages, the causes for the financial disorder and future restructuring of the financial systems has often been dominated by the rhetoric of specific constituencies serving individual interests even as it loses sight of the substantive argument. In India too, the eagerness to commend our regulatory practices has tended to brush the larger debate on the actual economic fallout of the crisis under the carpet.

In India too, the eagerness to commend our regulatory practices has tended to brush the larger debate on the actual economic impact of the crisis under the carpet. As the world economy lurches ahead, the fallout on the country and the innovative measures necessary to guide the Indian economy through this downturn need to take centre stage. The recently concluded G-20 summit at London too did not result in any concrete measures and the outcome was a litany of intentions rather than actions.

This paper examines the “conservative and prudent practices” within the Indian financial sector that cushioned the direct impact of the institutional meltdown witnessed in the West and discusses the measures that the country must pursue to regain the growth momentum and help restructure the global financial order. It seeks to highlight some of the priorities that must guide India’s responses on the path to economic recovery.

The main policy recommendations are as follows:

(i) Give highest priority to public investment in infrastructure and social sector;

(ii) Ensure credit for private sector to enable participation in infrastructure and manufacturing sectors. This would generate employment and spur GDP growth;

(iii) Encourage public and private investments through tax and other incentives in Rural Development and Agriculture sectors. Make supply chain infrastructure a national mission;

(iv) Develop alternate business models to ‘SEZs’. Policy must encourage ‘rural business hubs’ along with development of rural markets.

(v) Develop domestic BPOs and IT services markets. Special emphasis on development of IT infrastructure in rural and peri-urban areas;

(vi) India must seek out a new geo-economic space for itself through regional and international trade arrangements.

Read here – https://www.orfonline.org/research/india-and-the-economic-meltdown-challenges-and-possible-responses/

Indian Economy, Research

India and the Economic Meltdown: Challenges and Possible Responses